2019-TIOL-NEWS-171, Dated: Saturday, July 20, 2019

ST - Tribunal dismissed the appeals and held that the assessee was not entitled to exemption under Notification No.32/2004-ST to the extent of abatement of 75% from the gross freight value in the absence of any declaration furnished by the transport agencies from whom the services in question were availed, to the effect that the transport agents had not taken CENVAT credit on inputs / capital goods - appeal to High Court.

Held: It is very clear that for availing the exemption in terms of the said notification No.32/2004, satisfying the conditions stipulated in the said proviso with the help of the declaration of the service provider viz., transport agency was necessary and they could not be ignored - If such exemption was allowed to the assessee, without satisfying all the conditions of the proviso, it would violate the very basis of the exemption provided in the Notification No.32/2004 - It is trite law that the exemption notifications are to be strictly construed to the conditions stipulated in the notification for availing exemption and has to be complied with by the assessee concerned - submission that even without declaration as stipulated in the notification, the assessee was entitled to such exemption, is oversimplifying or glossing over the conditions itself, which cannot be permitted - The only way to prove that the conditions stipulated in the proviso of the said notification were satisfied, is to produce a certificate or declaration from the service provider that the service provider has not availed the CENVAT credit in respect of the service tax paid on the service provided to the assessee, which was clarified by the Board in the circular dated 5/1/2007-S.T dated 12-Mar-2007 - Tribunal was perfectly justified in denying such exemption in the cases where no such declaration from the service providers viz., transport agency was forthcoming from the assessee - Appeals dismissed: High Court [para 6 to 9]

ST - Assessee(s) availed credit of service tax paid on various input services used to construct residential complex - The residential projects received completion certificates and on the said date about 35% of the property remained unsold & for which no bookings were made - If such properties were sold in future, no service tax was payable - The assessees had given intimation that they would avail proportionate credit on input services after obtaining completion certificate & on square feet area basis - Appellants were made to reverse/pay credit amounting to Rs. 1,17,68,904/-(in case of M/s. Alembic) and Rs.65,30,867/-(in case of M/s. Shreno), towards the proportionate Cenvat credit availed by them during for the period 2010-2011 till obtaining Completion Certificate, at which time their output service activity was wholly taxable, on the ground that after receipt of completion certificate, the property had become immovable property and in case of future sale thereof, no service tax would have been payable and credit in proportion to "area which did not attract Service Tax" compared to the entire property area - such amounts were reversed Under Protest and since no SCN was issued, they filed applications for refund - subsequently revenue authorities issued separate SCNs, demanding 6%/8%/10% amount of sale of immovable property after obtaining Completion certificate where no Service Tax was paid by the Appellant, on the ground that they had availed Cenvat Credit and provided taxable as well as exempt services (sale of immovable property), and they had not maintained separate accounts - amounts paid were appropriated and the demands were confirmed - in appeal, CESTAT held that in the light of Rule 3 of CCR 2004, the assessees cannot avail full credit on input services received after obtaining completion certificate, however, they also cannot be expected to reverse 8%/10% of the sale price of immovable property after obtaining such Completion Certificate where no Service Tax is paid, as if it is sale of immovable property since Rule 6 per se does not apply to the present case; that Post 01.04.2016, as the assessees availed proportionate credit only, therefore, they cannot be asked to reverse such amount u/r 6(3) as they can be said to have maintained separate accounts as required u/r 6(2) - Insofar as the issue as to whether the assessees were required to reverse proportionate credit, apex court in Dai Ichi Karkaria has held that Modvat/Cenvat credit is a vested right & cannot be denied or recovered unless specific provisions for the same exist; that it is a settled principle that entitlement for credit is on the date of receipt of inputs when the output activity was taxable and merely because some finished goods become exempt later, the credit availed on inputs contained in semi-finished/finished goods cannot be denied - Also, a harmonious reading of Rule 3 of CCR r/w Rules 6 & 11 suggest that eligibility for credit must be examined only upon receipt of input service & if found to be availed at time when output service is taxable, then such credit is legitimately availed & cannot be denied without there being any specific provision in this regard, therefore, assessees need not reverse any credit availed by them till obtaining completion certificate; that consequently, if no credit is to be reversed, then the amount paid under protest cannot be retained by the Revenue & must be refunded to the assessees - revenue in appeal before High Court.

Held: CENVAT - With effect from 13.4.2016, Explanation 3 in rule 6(1) was amended specifically to deal with a situation as in the present case, where a deeming fiction was created that for the purposes of Rule 6 of the Rules, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a service as defined in section 65B(44) of the Finance Act, 1994 provided that such activity has used inputs or input services - However, there was no such stipulation prior to 13.4.2016 in law and prima facie , such situation was not to be treated as ‘exempted service' and did not attract the mischief created under rule 6 of the Rules - Therefore, for the period prior to 13.4.2016, the situation would be governed by rule 3 of the Rules for availing Cenvat Credit till such time i.e. till the time rule 6 was specifically made applicable by virtue of the deeming fiction created - In the facts of present case, it is evident that the respondent has started taking only proportionate credit after receipt of completion certificate which was after due intimation to the revenue department and also certified by independent CA - Therefore, rule 6 of the Rules in toto cannot apply prior to 13.4.2016 to the facts of the case since sale of immovable property is not exempt service at all - Therefore, in the light of the provisions of Rule 3 of the Rules, respondent cannot avail full Cenvat credit on input services received after obtaining completion certificate - Hence, the respondent cannot be expected to pay an amount equal to 8%/10% of sale price of immovable property after obtaining such completion certificate where no service tax is paid as if it is sale of immovable property since Rule 6 of the Rules perse does not apply to the present case until 13.4.2016 at all - Even after 13.4.2016, since the respondent had availed only proportionate credit, the respondent was not legally required to pay 8%/10% amount under rule 6(3) of the Rules, since it can be said to have maintained separate accounts as required under rule 6(2) of the Rules - As respondent has taken only proportionate credit on input services after receipt of completion certificate, duly backed by CA certificate and certified work sheets for the proportionate credits availed after completion certificate, it has fulfilled its obligation under Rule 3 of the Rules read with Rule 6 thereof and, therefore, no liability to pay any amount equal to 8%/10% of the sale price of immovable property can be fastened after receipt of completion certificate under Rule 6 of the Rules: High Court [para 13, 14, 15]

ST - While the law does not intend to allow any undue benefit to a service provider in terms of Cenvat credit of service tax paid on input services used in providing non-taxable output activity, however, once it is legally and validly availed, the same cannot be denied and/or recovered unless specific provisions exist for the same: High Court [para 15]

ST- CENVAT - Credit entitlement is on the date of receipt of inputs when the output activity was wholly dutiable and merely because the finished goods eventually became exempt later on, the credit availed on inputs which were contained in semi finished/ finished goods is not deniable: High Court [para 15]

ST - CENVAT - Sub-rule (7) of Rule 4 of the Rules lays down that the assessee is not required to wait till output service is sold to the service recipient and the assessee can take the credit immediately after the day on bill/challan of input service is received - there is no dispute that the respondent availed the credit after receipt of bill/challan in respect of input service and, therefore, it was legally entitled to take the credit on the date after the receipt of service bills/challans - Therefore, the availment of Cenvat credit by the respondent is absolutely legal and correct and in accordance with Rule 4(7) of the Rules - As at the time of taking credit, there was no existence of any exempted service, therefore, there is no application of Rule 6 - respondent did not avail the Cenvat credit in respect of the services received after obtaining the completion certificate in respect of exempted service or avail proportionate credit attributed to the taxable output service, therefore, Rule 6 has application for the period after obtaining the completion certificate: High Court [para 16]

ST - CENVAT - Rule 11(1)(2) and (3) of the CCR are applicable for manufactured goods whereas rule 11(4) applies to services - From sub-rule (4), it is clear that even if an output service provider avails the credit and output service becomes exempted, in such case the credit only in respect of inputs lying in stock or is contained in taxable service is required to be paid whereas there is no provision for payment of Cenvat credit equivalent to the input services used in respect of exempted service - Therefore, Cenvat credit availed in respect of input service is not required to be paid back under any circumstances and therefore, the respondent was not legally required to reverse any credit which was availed by them during the period 2010 till obtaining completion certificate i.e. during the period when output service was wholly taxable in their hands, merely because later on, some portion of the property was converted into immovable property on account of receipt of completion certificate and on which no service tax would be paid in future - Tribunal, therefore, rightly held that once the respondent are not required to reverse any credit availed by them on valid input services availed during the period 2010 till obtaining of completion certificate, the said amounts reversed by them under protest cannot be retained by the revenue authorities and have to be refunded to the respondent - it is not possible to state that the Tribunal has committed any legal error so as to warrant interference - Revenue appeal is dismissed: High Court [para 16 to 18]

ST - Construction of Residential Complex Service - Once the assessee is not required to reverse any credit availed by him on valid input services availed during the period 2010 till obtaining of completion certificate, the said amounts reversed by the assessee under protest cannot be retained by the Revenue authorities and those must be refunded to assessee - Tax appeal in the case of Alembic Ltd. 2019-TIOL-1495-HC-AHM-ST had come up before the High Court from the very same order of CESTAT and the Revenue appeal was dismissed on the above reasoning - consequently, the present appeal also fails and is dismissed: High Court [para 3, 4]

ST - The assessee is a SEZ Unit engaged in providing Information Technology Services and BAS - They filed refund claim for the period Jul.'16 to Sept.'16 under Notfn 12/2013-ST for refund of the service tax paid for services used for authorized operations of SEZ - After due process of law, the original authority partly sanctioned the refund claim and rejected the balance amount - The service tax paid on services used by assessee for authorized operations are exempted by notification on fulfillment of conditions stated therein - Para 3(1) states that the services are to be approved by Approval Committee - All the services listed in table have been approved by Approval Committee - In such circumstances, the department cannot reject the refund claim stating that these are used only for facilitation of employees and not for authorized operations - The Tribunal in case of M/s. Eaton Technologies Pvt. Ltd. - 2016-TIOL-2070-CESTAT-MUM had occasion to analyze the very same issue and dismissed the department's appeal filed against sanction of refund - The rejection of refund is unjustified - The impugned order to the extent of rejecting the refund is set aside: CESTAT

ST - The assessee had filed the refund claims before jurisdictional authorities for refund of service tax paid on various services used for export - The claims have been made under notfn 52/2011-ST - A part of the refund claimed by assessee stands rejected - Issue settled in favour of assessee on identical facts - The refund on this issue is allowable to the assessee - Therefore, the impugned order is not sustainable on this point and therefore, the same is set aside - As far as issue of non submission of Bank Realisation certificates is involved, matter remanded to the original adjudicating authority in the interest of justice for verification of Bank Realisation Certificates to be produced by assessee - If the assessee had realized the export proceeds and certificates to that extent is produced by assessee, then the refund is not deniable to the assessee: CESTAT

T M Synthetics Pvt Ltd case - Pr Commissioner of JNCH vested with powers under Central Excise

2019-TIOL-2058-CESTAT-DEL

Shuban Prints Vs CCE & ST

CX - It is a case of classification of goods viz. boxes manufactured by assessee - The assessee wants to classify the said goods under Chapter Heading No. 48173090 where as Revenue wants to classify the same under Chapter Heading 48192020 - The HSN also does not through light for proper classification of goods but on going through the Chapter entries, assessee is manufacturing boxes and for boxes, the Entry No. 48192020 is for boxes, therefore, the entry which is more specific, the goods are to be classified in that entry - In that circumstances, the classification merits on the impugned goods is under Chapter Heading of 48192020 of CETA, 1985 - As in this case on 1.11.2011, the assessee wrote a letter to the department for change of their classification and also filed ER-1 return accordingly - As the said fact was in the knowledge of department since 2011, therefore, the SCN issued to assessee on 2.1.2017 is barred by limitation - For the period within limitation, the assessee is liable to pay duty along with interest - As the action of assessee was in the knowledge of department itself, therefore, no penalty is imposable on the assessee - As the assessee is liable to pay duty and have not availed Cenvat credit on input and input services, for the period for which demand has been confirmed, assessee is entitled to avail Cenvat credit on input and input services: CESTAT

- Appeal dispose of: DELHI CESTAT

2019-TIOL-2057-CESTAT-ALL

CCE Vs Shubh Metals

CX - Shortage of raw materials detected along with excess stock of finished goods viz. M.S.Ingots - SCN issued for violation of rule 10 of the CER so as to render the goods liable for confiscation and consequently for imposition of penalty - Original authority confiscated the raw materials and finished goods and imposed redemption fine of Rs.13,80,000/- and penalty of Rs.6,74,953/- - Commissioner(A) held that the finished goods are not liable for confiscation but the shortages of raw material were - accordingly, the redemption fine and penalty were reduced to Rs.6 lakhs and Rs.3 lakhs respectively - Tribunal had allowed the assessee appeal and rejected the Revenue appeal but in further appeal by Revenue before the Allahabad High Court, the matter was remanded to the CESTAT.

Held: Ratio of law laid down by the Tribunal in the identical case of Commissioner of Central Excise, Kanpur V/s Sarada Steel Industries Pvt. Ltd. is followed and accordingly, while upholding the order of the Original Adjudicating Authority, the confiscation of the goods and imposition of penalty is upheld but the quantum is reduced to 50% of the redemption fine and penalty originally imposed by the Adjudicating Authority - both the appeals are disposed of: CESTAT [para 6, 7]

- Appeals disposed of: ALLAHABAD CESTAT

2019-TIOL-2056-CESTAT-DEL

General Manager Vs CCE & ST

CX - CENVAT - Impugned goods have been duly used in or in relation to the manufacture/production of HD Steel, Steel Cogs/TIS Cogs, TMT Rod & Bar, MS Plate, MS Pipes, MS nut, Telescopic Steel Props, Steel Sleepers, etc., without which it would not be possible to undertake mining activities - Since the disputed goods are not falling under the excluded category of goods specified in the definition of inputs, Bench is of the view that Cenvat credit can be extended to those goods as per the broad definition of "inputs" contained in Rule 2(k) of the CCR, 2004, excepting cement, which has no participation either directly or indirectly in the manufacture of final product - impugned order set aside and appeal allowed: CESTAT [para 6, 7]

CX - CENVAT - Credit is denied on the ground that the said supplier unit was not registered with Central Excise Department - It is an admitted fact on record that the receipt of goods in the appellant's unit and the duty paid character of those goods have not been disputed either in the Original or in the Appellate Order - Thus, denial of Cenvat credit for mere technical lapse of non-obtaining the registration certificate at the time of issuance of invoice, cannot be a ground to deny the Cenvat credit - CENVAT credit being a beneficial piece of legislation intended for arresting the cascading effect, cannot be denied, in view of the fact that disputed goods have suffered duty and have been received/used in the appellant's factory or mine for production of the final product: CESTAT [para 6]

- Appeal allowed: DELHI CESTAT

Cus - Writ petitions pertain to import of what is described as 'Multi Function Devices' / Machines [MFDs] from Singapore and other countries through Chennai Port - It is submitted that the goods were assessed and an inspection report was filed, but the respondents are not taking any action to assess and clear consignments covered under aforesaid Bills of Entry in spite of repeated requests and reminders - Counsel for the Revenue informed the Court that writ petitions by several other importers with the same prayers were filed and those writ petitions were disposed of by another Single Judge of this Court vide common order dated 22.02.2019, wherein and whereby the Single Judge acceded to the prayer in part by giving some directions to release the consignments, on bonds being furnished - however, Division Bench of this Court allowed the Revenue appeals and set aside the order of the Hon'ble Single Judge vide order dated 25.04.2019.

Held: It follows as an inevitable sequitur that the instant writ petitions, have to be dismissed following the judgments of Division Bench - it is now submitted without any disputation or disagreement that the revenue has issued 'show cause notices' to each of the writ petitioners - Therefore, as show cause notices have been issued, they will take the course as per the directions of the Division Bench viz. writ petitioners shall submit their reply to the SCNs, the same shall be adjudicated upon on merits, after affording an opportunity of personal hearing and the matter will be carried to its logical end - Petitions disposed of: High Court [para 21 to 23]

Cus - Petitioner challenging imposition of penalty predominantly on the ground that they were denied an opportunity to cross examine the witnesses from whom statements were recorded by the authority - Charge is that the petitioner had entered into a conspiracy agreement with certain named and unknown persons and thereby procured smuggled foreign gold items, without any record of procurement - Petitioner submits that there was no admission with regard to the charge of conspiracy as against the petitioner and, therefore, he had sought for permission to cross examine these three witnesses (who are his staff), which came to be denied by the authority.

Held: Petitioner had sought for a request to cross examine but the same came to be denied - Thereafter, the petitioner had also raised this before the Appellate Authority, which was also rejected - In the instant case, the specific charge against the petitioner was a conspiracy agreement with certain named and unknown persons for the purpose of procuring smuggled gold and this aspect of conspiracy was not admitted by the petitioner in his statement recorded before the authorities - The issue as to whether there was a conspiracy or not is now claimed to be established through cross examination of the three witnesses - Court is of the affirmed view that the petitioner can be granted an opportunity to cross examine the three witnesses viz., Maheswaran, Dhamodharan, Abdul Azeez, which exercise should be completed within a stipulated time - Order in Appeal is set aside and the matter is remanded to the second respondent herein for the limited purpose of permitting the petitioner herein to cross examine the three witnesses - Such an exercise of cross examination shall be completed, as expeditiously as possible, in any event, within a period of 6 weeks and, thereafter, the adjudicating authority should pass an order expeditiously - Writ petition disposed of: High Court [para 7, 14 to 16]

Cus - Safeguard Duty - Notification 1 of 2018 dated 30.07.2018 issued under the Customs Tariff Act, 1975 - interim reliefs in respect of the future imports of solar panels and solar cells - petitioner seeks to add as respondents (i) Jupiter Solar Power Ltd. and (ii) Indo Solar Ltd., the two parties being indigenous manufacturers of solar panels and solar cells, at whose instance and in whose favour the impugned Notification levying safeguard duty has been issued under the Customs Tariff Act, 1975 - petitioner's contention is that the final findings of the Director General of Safeguard which forms the basis of the impugned Notification are contrary and in defiance of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997; that the findings are perverse - Nagpur Bench of the High Court, in petitioner's own case, by order dated 16th April, 2019 has allowed the petitioners to clear its imported solar panels and solar cells on payment of 50% safeguard duty and balance 50% being secured by a bond - interim order passed by the Nagpur Bench dated 16th April, 2016 is still in force - It is not disputed and cannot be disputed that the decision of the Nagpur Bench of this Court is binding upon all the Authorities within the State of Maharashtra - since the Nagpur Bench has taken a decision to grant ad interim reliefs in above terms, Bench also follows the same - Petition adjourned to 26 th July 2019: High Court [para 5 to 7]

Cus - The assessee have imported Assorted Buckles against bill of entry declaring the value as 0.40 USD per dozen as mentioned in invoices - The departments do not accept the declared value of imported goods and consequently assessing authority assessed said bill of entry on enhancement of value i.e. 0.94 USD per dozen - The entire order of Commissioner (A) is on the basis that the assessee have accepted the enhancement of the value - However from the correspondence shows, it is clear that the assessee had requested for a speaking order and duty was paid under protest, therefore, it cannot be said that the assessee have accepted the enhanced value - Since neither speaking order was passed by original authority nor the issue dealt with on the merit by Commissioner (A), in the interest of justice, the matter remanded to the adjudicating authority for passing a speaking order on the enhancement of value - Accordingly, the impugned order is set aside: CESTAT